- What is a PIP in Forex?
- Why are PIPs Important in Forex Trading?
- What is a Spread in Forex?
- How Do PIPs Work with the Japanese Yen (JPY)?
- What is Forex Pair Volatility?
- Types of Forex Currency Pairs
- How to Calculate the Value of a PIP in Forex
- How to Use Our PIP Calculator
- How Much is 50 PIPs Worth?
The foreign exchange (Forex) market is the largest financial market in the world, with over $7 trillion traded daily. In the Philippines, Forex trading is gaining popularity, allowing traders to invest in currency pairs like USD/PHP, EUR/USD, and JPY/PHP.
If you're trading Forex, understanding PIPs (Percentage in Point) is essential. PIPs measure price movements between currency pairs and help determine profits and losses in your trades.
This guide explains what a PIP is, how it works, how to calculate PIP values, and why it matters in Forex trading in the Philippines.
To make things even easier, we’ve also provided a free PIP Calculator to help you instantly calculate PIP values and manage your trading risks effectively.
What is a PIP in Forex?
A PIP (Percentage in Point) is the smallest price movement that a currency pair can make in most Forex trading platforms.
For most major currency pairs, a PIP is equal to the fourth decimal place of an exchange rate.
Forex pip calculator
If USD/PHP moves from 56.2500 to 56.2515, that’s a change of 15 PIPs.
Since Forex markets move quickly, PIPs provide a standard unit to measure price changes efficiently.
Why are PIPs Important in Forex Trading?
PIPs are a key part of Forex trading because they help traders:
- Calculate profits and losses – Each PIP movement determines how much you earn or lose on a trade.
- Manage risk – Stop-loss and take-profit levels are set using PIPs to control potential losses.
- Understand spreads – Brokers charge fees through spreads, measured in PIPs.
- Assess market volatility – Analyzing PIP movements helps traders identify volatile currency pairs and adjust strategies.
- Compare broker pricing – Different brokers offer varying spreads in PIPs, impacting your trading costs and profits.
What is a Spread in Forex?
A spread is the difference between the buy price (bid) and the sell price (ask) of a currency pair. This is how brokers earn revenue instead of charging direct commissions.
Forex pip calculator example
If the USD/PHP buy price is 56.2520 and the sell price is 56.2500, the spread is 0.0002 (or 2 PIPs).
A narrower spread means lower trading costs, while a wider spread increases costs.
How Do PIPs Work with the Japanese Yen (JPY)?
Most currency pairs measure PIPs at the fourth decimal place (0.0001). However, JPY pairs are an exception.
For JPY currency pairs (like USD/JPY or JPY/PHP), a PIP is measured at the second decimal place (0.01 instead of 0.0001).
For example
If USD/JPY moves from 130.75 to 130.95, that’s a 20 PIP movement.
Understanding this is crucial when trading JPY pairs, as their price movements appear larger than other currencies.
What is Forex Pair Volatility?
Volatility refers to how much a currency pair moves in PIPs over a certain period (such as a day).
Highly volatile pairs experience bigger price swings, creating profit opportunities but also increasing risks.
Formula for Volatility:
Volatility = Highest price − Lowest price
For example
If USD/PHP reaches a high of 56.3000 and a low of 56.2555, the daily volatility is 44.5 PIPs.
Traders often use volatility indicators to manage risk and adjust their position sizes accordingly.
Types of Forex Currency Pairs
Forex pairs are classified into three main categories:
1. Major Pairs
These involve the most traded currencies, including the US dollar, euro, and Japanese yen.
✅ EUR/USD – "The Fiber" (most traded globally)
✅ GBP/USD – "The Cable"
✅ USD/JPY – "The Ninja"
✅ USD/CHF – "The Swissy"
2. Minor Pairs
These pairs don’t include the US dollar, but still feature major currencies:
✅ EUR/GBP – Common for European traders
✅ GBP/JPY – A highly volatile pair
✅ EUR/AUD – Popular in Australia and Europe
3. Exotic Pairs
These involve a major currency against an emerging market currency, such as USD/PHP (US dollar vs Philippine peso).
Exotic pairs tend to be more volatile and have higher spreads.
How to Calculate the Value of a PIP in Forex
The value of a PIP depends on the currency pair, lot size, and exchange rate.
Formula:
PIP Value = (PIP Change × Lot Size) ÷ Exchange Rate
For example
If USD/PHP moves from 56.2500 to 56.2501 (1 PIP change) and you trade 1 standard lot (100,000 units):
PIP Value = (0.0001 × 100,000) ÷ 56.2501 = ₱8.90
Most Forex trading platforms calculate PIP values automatically, but understanding the formula helps manage risk.
How to Use Our PIP Calculator
Instead of manually calculating PIPs, use our free PIP Calculator to quickly determine your profit or loss.
How It Works:
- Enter the number of PIPs moved
- Select the currency pair (e.g., USD/PHP, EUR/USD)
- Enter the trade size (lot size)
- Choose your deposit currency (PHP, USD, etc.)
Click "Calculate," and the tool will instantly display the PIP value for your trade.
How Much is 50 PIPs Worth?
The value of 50 PIPs depends on the lot size you trade:
| Lot Size | PIP Value (USD/PHP) | Profit/Loss for 50 PIPs |
|---|---|---|
| Standard Lot (100,000 units) | ₱8.90 per PIP | ₱445 |
| Mini Lot (10,000 units) | ₱0.89 per PIP | ₱44.50 |
| Micro Lot (1,000 units) | ₱0.089 per PIP | ₱4.45 |
If you trade 1 standard lot of USD/PHP, and the price moves 50 PIPs in your favour, your profit is ₱445. If the trade moves against you by 50 PIPs, you lose ₱445.
For exact calculations across different currency pairs, use our PIP Calculator.
Expert advice
PIPs are essential for measuring market movements and managing risk in Forex trading. By understanding how PIPs work, traders can minimize losses and maximize profits.
To get started, use our free PIP Calculator to instantly calculate trade values and improve your trading decisions.
